Have savings now peaked? NS&I pulls its best-ever savings bond after more than 225,000 sign up – triggering a raft of rate cuts across the market
- Government-back bank closed 6.2 per cent bonds rate five weeks after launch
- NS&I had surprised savers in August when it lifted the rates of its bonds
National Savings & Investments has closed its best-ever savings bond – triggering a raft of rate cuts across the market.
Banks and building societies rushed to act in response to NS&I’s decision yesterday as experts warn savings rates have now peaked.
The government-backed bank closed its 6.2 per cent bonds rate five weeks after it was launched. More than 225,000 savers have bought the one-year fixed rate bonds.
Following the announcement, Coventry Building Society withdrew its one-year fixed rate bond paying 5.75 per cent, replacing it with a 5.5 per cent rate.
Oxbury Bank, which offered one of the next best rates after NS&I, pulled its 6.11 per cent one-year fixed deal. Paragon Bank and Charter Savings Bank have both cut rates on their fixed rate cash Isas.
NS&I closed its 6.2 per cent bonds rate just five weeks after it was launched, as experts warn that savings rates have now peaked
Banks have been quick to follow suit and reprice their bonds – a sign savings rates have peaked, said expert Anna Bowes from Savings Champion.
Ms Bowes added: ‘There’s a general trend of banks repricing as competition has waned considerably. Some of the top rates are starting to be withdrawn and replaced with lower ones. There’s a feeling in the air that more cuts are yet to come.’
The best one-year fixed rate savings account on the market yesterday paid 6.12 per cent and was offered by Al Rayan via investment platform Raisin.
Laura Suter, from stockbroker AJ Bell, urged savers to grab high savings rates before they disappear. ‘If you’re eyeing up a particular savings account it would be best to move quickly so you can lock in that rate while supplies last.’
The Bank of England broke its almost two-year streak of interest rate rises last month, holding the base rate at 5.25 per cent after inflation dropped by more than expected.
Economists have said this signalled that borrowing costs were at or near their peak.
NS&I surprised savers in August when it lifted rates on its bonds, issuing 12-month guaranteed growth bonds paying 6.2 per cent and guaranteed income bonds at 6.03 per cent on all deposits up to £1million.
It marked an unusual move that put its bonds at the top of best-buy lists.
Investing £1million in the one-year bond would generate £62,000 in interest. A higher rate taxpayer would take home £37,400 of this, as interest earned on savings is taxed at the saver’s marginal tax rate.
NS&I surprised savers in August when it lifted rates on its bonds, issuing 12-month guaranteed growth bonds paying 6.2 per cent and guaranteed income bonds at 6.03 per cent on all deposits up to £1million
Higher rate taxpayers have an allowance of £500 after which tax is levied, while basic rate taxpayers can earn £1,000 in interest on their savings before paying tax.
No new purchases could be made as of Friday. Postal applications received for a reasonable period would be honoured, NS&I has said.
NS&I chief executive, Dax Harkins, said: ‘This summer’s new one-year fixed-rate bonds have been a great success.
‘I am really pleased we were able to keep them on sale for upwards of five weeks, enabling more than 225,000 savers to benefit from the highest interest rates we have ever offered on these products.’
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